Public Accounts Committee : Analysis – UPSC GS2

NOTE: The Public Accounts Committee (PAC) has completed a hundred years of existence.
Public Accounts Committee:
  • Public Accounts Committee (PAC) is a standing committee of selected members of Parliament to examine the audit reports of the revenue and the expenditure of the Government of India
  • History: It was first established in 1921 under the Government of India Act 1919 provisions.
  • Composition: It has 22 members – 15 are from Lok Sabha and 7 from Rajya Sabha. They are “elected” by members of Parliament amongst themselves via a system of proportional representation by means of single transferable vote
  • Functions & Powers:
    • It examines the three audit reports of CAG submitted to president: appropriation accounts, finance accounts and public undertakings.
    • It examines the appropriation accounts and the finance accounts of the Union government and any other accounts laid before the Lok Sabha.
    • It examines the accounts of the public service corporations and other such bodies whose accounts are audited by CAG.
What are the issues with government accounting?
  • Accounting Methods: Both central and state governments use cash flow accounting, while private Indian companies follow accrual-based accounting standards.
  • Independence of CAG:
    • Appointment: There are issues related to the appointment of CAG (Article 148). For example, usually serving or recently retired government officer is appointed as CAG, and CAG is repeatedly selected from the Indian Administrative Service rather than from any other service.
    • CAGs can be influenced to overlook errors, intentional or otherwise. The final appointing authority for the CAG appointment is the prime minister (PM).
    • Dismissal: Dismissal of the CVC requires the recommendation of the Supreme Court, but only a special resolution has to be approved by both houses of Parliament to remove the CAG.
  • Generalists: PAC members are usually generalists and CAG’s reports require independent expert evaluation in the simplest of terms.
  • Superficial Scrutiny: Separate sub-committees of the PAC consider expenditures, and their reports are made available on Parliament’s website. However, these reports lack in-depth scrutiny of the government’s accounts.
  • Ex Post Facto: PAC comes in picture when expenditure has already occurred.
  • No Punishment powers with PAC.
  • PAC can not question the policy. Only looks into the budget perspective.
What are the changes required to improve the PAC’s oversight?
  • Selection panel for the CAG’s office should include the PAC chairperson and the chief justice of the Supreme Court.
  • There is a need to choose a professional who can present complex audit reports in simple terms. If CAG reports are complex, it becomes difficult for the PAC to go through the details and unjustified government spending go undetected.
  • PAC chairperson should have a reasonable understanding of accounting principles and practices.
  • Two independent private sector accounting firms can be selected by the PAC to provide analytical comments about CAG reports confidentially to the PAC. It would help in realizing transparency in government spending.
  • Huge volumes of funds are allocated repeatedly to recapitalize public sector banks (PSBs). The CAG needs to assess the extent and manner in which taxpayer funds are used to recapitalize PSBs.
  • Similarly, the implementation of farm loan waivers is also puzzled. The PAC should check if the net present value of the amounts waived added up to more than the announced total amounts.
Way Forward:
  • Need is to correlate the budget numbers with recent CAG reports or the deliberations of the PAC.
  • Accounting statements of several state governments too, need careful examination by the PAC as they collectively spend more than the central government.
Discuss the role of Public Accounts Committee in establishing accountability of the government to the people. (150 words)

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